Samuel Henry Symington v Pretoria-Oos Privaat Hospitaal Bedryfs (Pty) Ltd

The respondent (plaintiff) operated a private hospital in Pretoria. The first appellant, a specialist radiologist and founding shareholder, entered into a shareholders agreement in June 1995 undertaking to conduct a radiologists' practice in the hospital's radiology section. A lease was entered into in June 1996 whereby the radiology section (approximately 1000m²) was let to the first appellant or his nominee for ten years at a nominal rental of R1.00 for the entire period. Independent Advisors SA Incorporated was nominated as lessee and subsequently entered into a sublease on 8 November 1996 with a partnership of radiologists for approximately 900m² at R45,000 per month (subject to 10% annual increases). During June and November 1996, all three appellants were shareholders and directors of the respondent. The second and third appellants were also directors of Independent Advisors. On 25 June 1998, all shares in the respondent were sold to Netcare. In terms of the share sale agreement, all directors were obliged to resign. The three appellants handed in resignation letters to Netcare's representative on that date and received payment for their shares. However, the prescribed form CM29 notifying the Registrar of Companies of their resignations was only lodged on 12 September 2000. Summons was served on the appellants in November and December 2000, claiming approximately R7.3 million for alleged breach of fiduciary duty as former directors. The claim consisted of the present value of the rental stream from the sublease and ancillary payments for rates, water and utilities paid by the subtenant to Independent Advisors.

• When did the 'debt' become 'due' in terms of section 12(1) of the Prescription Act 68 of 1969?
• Was the plaintiff's claim one for damages or for disgorgement of profits?
• Whether the completion of the prescription period was extended in terms of section 13(1)(e) of the Prescription Act?
• Whether the appellants resigned as directors by agreement with the respondent company on 25 June 1998 or only on 12 September 2000 when the Registrar was notified?
• Whether directors can terminate their directorships by agreement with the company where the articles of association prescribe a specific resignation procedure?

The appeals by the first appellant and by the second and third appellants were upheld with costs, including costs of two counsel. The cross-appeal by the respondent was dismissed with costs. The special pleas of prescription raised by all defendants were upheld and the plaintiff's claims were dismissed with costs.

1. Directors of a company can terminate their directorships by agreement with the company, even where the articles of association prescribe a specific procedure for resignation by notice. Article provisions governing unilateral resignation do not exclude termination by mutual agreement unless expressly stated. The relationship between director and company is essentially contractual. 2. A claim for damages arising from breach of fiduciary duty is distinct from a claim for disgorgement of profits. A damages claim requires proof of loss, while a disgorgement claim requires proof that the fiduciary received a profit, regardless of whether the principal suffered loss. 3. For prescription purposes, a debt arising from a claim for damages for breach of fiduciary duty becomes 'due' under section 12(1) of the Prescription Act when the breach giving rise to the damages occurred, not when subsequent payments or losses are suffered. The 'once and for all' rule applies. 4. Section 13(1)(e) of the Prescription Act extends prescription where the debtor is a member of the governing body of a creditor juristic person. The extension ceases when the debtor ceases to be a member of the governing body, which in the case of directors means when they effectively resign, not when the Registrar is notified.

The Court noted that the public interest in knowing when a directorship has been terminated is sufficiently protected by section 216(2) of the Companies Act, which requires a company to notify the Registrar within fourteen days of a director vacating office, on pain of criminal sanction. This addresses any concern that termination by agreement might leave the public unaware of changes in company directorships. The Court also observed that in South African law, unlike potentially in Canadian law (referencing Canadian Aero Service Ltd v O'Mally), a claim for disgorgement of profits is expressly not a claim for damages, following the clear authority of Robinson v Randfontein Estates Gold Mining Co Ltd. The Court suggested that the plaintiff's formal admission in its replication that the claim was for damages amounted to an election to categorize the claim in that manner, though the Court did not need to finally determine whether the plaintiff could be strictly bound by this election given its other findings.

This case is significant in South African law for several reasons: (1) It clarifies the distinction between a claim for damages arising from breach of fiduciary duty and a claim for disgorgement of profits - while both may arise from the same breach, they have different elements and different prescription consequences. (2) It confirms that directors can resign by agreement with a company, notwithstanding articles of association that prescribe a specific resignation procedure, following the principles in Cape Dairy Cooperative and Kaap Suiwelkoöperasie. (3) It demonstrates the application of the 'once and for all' rule to damages claims arising from breach of fiduciary duty - the debt becomes due when the breach occurs, not when subsequent losses are suffered. (4) It illustrates the careful pleading required to distinguish between different remedies for breach of fiduciary duty, as characterization affects when prescription begins to run. (5) It addresses the interplay between company articles, the Companies Act notification requirements, and the practical realities of corporate transactions in determining when a directorship ends.